* FTSE 100 falls 0.4 percent
* Ukraine accuses Russia of bringing in troops
* State data points to German inflation pick-up in August
* Mining stocks hit by fall in iron ore prices
* Morrisons, CRH lifted by analyst upgrades
By Tricia Wright
LONDON, Aug 28 Growing tension in Ukraine and
speculation the European Central Bank will not act soon to
loosen policy put pressure on Britain's top share index on
Ukrainian President Petro Poroshenko said Russian forces had
been "brought into Ukraine," and the country's security and
defence council said areas near the Russian border had fallen to
the Russians and the separatist Ukrainian rebels they support.
Slight increases in inflation in three German states
suggested the threat of deflation was receding in Europe's
largest economy. That should help stabilise the euro zone
inflation rate and take some pressure off the ECB.
Speculation the central bank would act on policy had been
building since ECB President Mario Draghi struck a dovish tone
in a speech at Jackson Hole, Wyoming, last week.
ECB sources told Reuters on Wednesday new policy moves are
unlikely at the bank's meeting next week, unless August
inflation figures, due on Friday, show the euro zone sinking
close to deflation.
The blue-chip FTSE 100, which on Wednesday had risen
to its highest close since early July, was down 27.74 points, or
0.4 percent, at 6,802.92 points by 1124 GMT.
The FTSE 350 Mining Index fell 2.3 percent,
with mining company Rio Tinto weakening by 3.6 percent
on a drop in iron ore prices.
The FTSE has risen around 4 percent in the past 2 1/2 weeks,
helped by the expectations of ECB stimulus. The index climbed to
6,894.88 points in mid-May, its highest level in more than 14
years. But it has not passed 6,900, considered a key hurdle
before the FTSE can challenge record highs around 7,000.
Adrian Slack, a technical strategist at Novum Securities,
however, said any pull-back on the FTSE should be relatively
"I think we're just pausing for breath before we go higher
at the end of the year," Slack said. "The downside looks pretty
Among the brighter spots on Thursday, supermarket chain Wm
Morrison advanced 1.7 percent, bolstered by a Deutsche
Bank recommendation upgrade to "hold" from "sell". It reckons
Morrisons will report in-line first-half results on Sept. 11.
CRH also rose 1.7 percent as Credit Suisse upgraded its
rating on the Irish building supplies group to "outperform" from
"underperform", citing valuation grounds.
(Additional reporting by Sudip Kar-Gupta; Editing by Larry